Tuesday, October 2nd, 2012

[ Eric McAfee writes the wonderful blog American Dirt, where through careful observation of the urban environment he draws out very interesting findings from the most ordinary of places, focusing on places like overlooked strip malls and transition spaces between towns. I hope you’ll check it out – Aaron. ]

I have chronicled the tireless migration of retail across metropolitan landscapes several times in the past; it formed the central topic of one of my earliest blog posts. Unfortunately, most of my posts have focused on the blight left by outdated retail typologies: the dead malls, pockmarked parking lots, blighted strip malls, or (at the very best) the once widely coveted destinations that are now dominated by check cashing centers and pawn shops. I’m not trying to dwell on the negative, but the fact remains that focusing on the less prosperous retail centers helps to substantiate an already manifest assertion: retail in the US is more or less always soft. The supply of new retail options always far exceeds the demand; some have even argued that developers’ ambitions to construct retail has become completely untethered from consumer demand, to the point that they are no longer related. Retail locates where the investors see fit, and those investors can range from experienced developers to an elderly couple hoping to build a strip mall to provide a nest egg for the grandkids.

Thanks to the almost exponential proliferation of shopping centers over the last half century, the rules for straight-line depreciation of a retail outlet tend to employ estimations of about 15 years, meaning that the average commercial plaza will need a thorough renovation in that time frame if it is to retain a lucrative market. In fast-growing metropolitan areas, that number could even be smaller. But suburban growth patterns, where decentralization is the primary force acting upon new settlements, are fairly predictable in nature: an auto-oriented shopping plaza that still lures top-dollar tenants after 40 years is the exception, not the norm. I have covered the topic of metropolitan retail periodically over the years, and at the moment I’m not sure I have anything new to offer.

But smaller communities are another story altogether. Many of them are static in population; quite a few are shrinking. Presumably their retail landscapes would echo these patterns by demonstrating very little change, right? An evaluation of the small Louisiana city of Houma (50 miles to the southwest of New Orleans) would suggest that this is not the case. The region itself is not particularly depressed; consistent growth in the fishing and petrochemical industries kept the unemployment rate among the nation’s lowest in the spring of 2009, during the peak of the Great Recession. It’s unemployment has inched up to above 5.0% since then, but it still remains well below both the state and national rate. It’s relatively vigorous economy, however, is exerting only a modest impact on population change. Houma itself grew 4.1% from between the 2000 and 2010 Census, and the surrounding parish of Terrebonne grew 7.04%— not bad, considering Houma suffered through four hurricanes in the last decade, and even better considering Louisiana’s anemic population growth of 1.4% over this time frame. But these figures hardly indicate an oil boomtown comparable to the many that have sprouted like mushrooms in Texas, or the more recent equivalents in Williston, ND and Gillette, WY.

Despite relatively modest growth, the retail developments have relentlessly shifted away from Houma’s town center. This pattern isn’t merely referring to the hegira of downtown businesses to auto-oriented shopping centers—that obviously happened decades ago. The latest phase shows a move from those neighborhood strip malls to a marginally different automobile oriented typology. The side of Houma west of the Intercoastal Waterway that bisects the city is both higher income and more heavily populated. Nonetheless, most of the shopping centers that hug the main street look a bit like this:

Granted, this isn’t an altogether fair example, since this tired old shopping center sits just a half-mile west of downtown Houma, in what is visibly the lowest income part of town. But a mile further down State Road 24 is wealthier, and the strip malls still look the same.

The hobbled giant K-Mart has been in decline for decades now, to the point that surviving branches only occupy that faded strip malls that Wal-Mart would have jettisoned from its portfolio long ago. (I blogged about this trend in K-Mart a few years ago.) The only other major retail neighbor to K-Mart?

A boarded-up dollar store.

Continuing further down State Road 24, the subdivisions are conspicuously middle class, but tenants suggest low leasing rates in all the strip malls. The Southland Mall is hanging on and still boasts some major chains like American Eagle and Bath and Body Works, but it’s not exactly thriving:

From my observations during an August visit, the mall is barely 60% occupied, with particularly high vacancy levels in the wing adjacent to the long-atrophied department store Sears (a frequent occurrence in malls with Sears that I blogged about earlier). Many of the other remaining tenants are mom-and-pop stores; nothing wrong with this in theory but clearly an indicator that the mall isn’t commanding high rents. The outside strip mall across the street looks better from a superficial visit; at least it’s heavily occupied.

But the tenant mix is hardly lucrative: temp agency, tax filing, gold/silver exchange, and not one but two Armed Forces Career Centers. (Both are in operation.) I have no objections to any of these tenants, but Michael Moore observed almost a decade ago the tendency for military recruiters to seek low-rent retail space. This relatively large strip mall does not host a single nationally recognized tenant.

East Houma, with a mostly older housing stock and a smaller, less affluent population, predictably shows much of the same trend in terms of its shopping centers:

Most of the centers are either surviving in poor repair, struggling with high vacancies, or completely abandoned. East Houma residents still have access to several reasonably large grocery stores, fast food restaurant chains, a smaller Wal-Mart, and a handful of basic services, but not a single strip mall would could be considered flourishing.

My favorite example, however, is the old shopping center just a few blocks from Houma’s partially revitalized Main Street. It’s proximity to city and parish government offices fostered an idiosyncratic reinvention:

Yes, a former shopping center with one large anchor has transformed into administrative offices for city government. However, the City of Houma does not seem to have renewed its latest lease:

This photographic array of shopping centers at various levels of neglect does not intend to paint a negative portrait of Houma. Frankly, few onlookers have demonstrated much sentimentality about the decline of automobile-oriented shopping centers from the 1960s to the 1980s. But up to this point, nothing I’ve revealed has suggested a small metropolitan area with unemployment far below the national average. A map of Houma is essential to distinguish the Houma’s flourishing retail corridor from its various struggling pockets.

Almost all of the shopping centers photographed up to this point have rested within the Houma municipal boundaries; if they haven’t, they at least were close to large residential developments. (The last photo series, showing the grocery store converted to City Hall, sits almost exactly where the Red “A” stake rests on the map.) But the thriving retail corridor does not intersect with any major subdivisions; it is removed from the grid. It largely sits on what was probably cheap land outside the city limits, and it represented by the red ellipse on the left side of the map: State Road 3040, called either Tunnel Boulevard or Martin Luther King Boulevard, depending on the location. Along this arterial, the commercial landscape looks more like this:

It doesn’t win any awards for aesthetics or pedestrian accommodation, but it is a prosperous retail corridor by almost every measurement. It carries some of the most ubiquitous national brands: Books a Million, Target, Applebee’s, Chili’s, Best Buy, Hobby Lobby, as well as some emerging brands that fastidiously avoid sub-par locations, such as a Charming Charlie’s. Predictably, the corridor also contains a Wal-Mart. I counted only one sizable (over 20,000 s.f.) vacant storefront across the entire strip of more than a mile in length. This stretch of State Road 3040 has become the official commercial/retail hub for the 100,000 residents of Terrebonne Parish.

What this proves is that a city with the size and relative prosperity of Houma can sustain a diverse array of retail that befits its status as a minor metropolitan area. (It earns this label through shared economic activity with the smaller city of Thibodaux, in Lafourche Parish 20 miles to the north; the Houma-Bayou Cane-Thibodaux Metropolitan Statistical Area contains around 200,000 people.) Empirical evidence suggests that the retail typology has shifted significantly over the years; using definitions provided by the Urban Land Institute’s Dollars and Cents of Shopping Centers, the standard in Houma has evolved from several smaller neighborhood centers (averaging 60,000 s.f. in Gross Leasable Area) to a more metropolitan scale. Like beads on a string, a series of loosely connected community centers (averaging 150,000 s.f.) function in aggregate as a regional center of well over one million square feet, allowing all the national names to stand rank-and-file in an easy display as motorists cruise by in their vehicles. Meanwhile, any smaller shopping center that doesn’t fall along this corridor has kissed national names goodbye, with the exception of perennial laggards like K-Mart.

While I’d hardly assert that a single community like Houma can operate as a microcosm for similarly sized metros across the county, it is not entirely difficult to find other examples in otherwise culturally unrelated municipalities. My home state of Indiana has two smaller cities, neither of which can boast an economy as strong or stable as Houma but are more populous (at least for now). Anderson and Muncie have witnessed a similar migration of all major retail: in Anderson, most all retail hugs a two-mile stretch along Scatterfield Road, running just to the east of the older parts of the city. And the smaller shopping centers not abutting Scatterfield are typically dying or dead. In Muncie, the commercial main street is McGalliard Road, an arterial north of the old city center.

Houma and Muncie at least share indications of a reawakening interest toward specialty retail in their historic downtowns; Anderson cannot claim such a renaissance at this point. While the trends on display in these smaller cities may not shed much light on what’s happening in metros over one million inhabitants—metros with an extensive network of discretely incorporated suburbs—they at least provide some added texture to our understanding of the omnipresence of decentralization forces at work. Automobile dependency is ostensibly so great that neighborhood shopping isn’t necessary; in a small city, it is just as convenient to line all the retail up in a row on a busy highway on the more prosperous side of town. One could critique the thriving commercial corridor of Houma as mindless sprawl for its appearance and utter disregard for transportation alternatives, not to mention its apparent avoidance of municipal boundaries that would require it to contribute to the city’s tax base. But retail supply has long pursued the latest locational trends to save money and capture a broader clientele, while leaving the blight of obsolete older typologies in its wake. Whether the shift in Houma is sprawl or part of a broader regionalist way of thinking (opening the visibility of these storefronts to all of Terrebonne Parish and not just those who live in Houma), really depends on how planners and economists contextualize their data.

19 Responses to “Big Boxes: Keeping All the Ducks in a Row by Eric McAfee”

Very thoughtful and perceptive post by Eric. I have chosen to work in an area of older commercial typologies, partly because it’s essential that planners and redevelopment practitioners figure out how to appropriately intervene in the death spiral of outmoded strip (and even mall) retail. Once it becomes blighted, its high visibility drags down the surrounding area, which may be otherwise low-moderate income and relatively stable.

I’d extend the remarks about the three small cities: both Houma and Muncie have well-paying economic drivers. With enough folks having enough disposable income to seek “interesting” (i.e. non-chain) places to spend money (and with enough college students present), one would expect each city to favor and foster some downtown/indie redevelopment. Houma has the oil and gas industry, and Muncie has Ball State University…in contrast with Anderson, which is the site of shuttered GM plants and a racino at the far southeast edge of town.

Eric also touches on the “regionalization” of physical retail locations: bigger boxes need bigger regional support footprints, especially true in places where average regional density is declining.

Retailers gravitate toward busy highways and interstate junctions to more easily accommodate those driving 5-10 miles or more. Municipal boundaries may contribute to fine-tuning of location decisions, as competing baseline tax rates and local incentives may come into play, but I suspect those fine-tuning decisions are possible only if a municipal boundary provides a convenient arbitrage opportunity for a developer or retailer.

Online retail will endlessly, inexorably pull more and more of the retail economy away from big boxes. I’ve bought shoes, home appliances and even small furniture online. It makes comparison shopping easier and saves time and gas. Clothing and food are the only two areas where online will probably never takeover retail. I predict that many of these big boxes will never be reused and will be demolished even before the end of their ‘planned’ existence.

@Matthew Hall, the meatspace will not be going away now or in the long-term future. That’s especially true for retail.

Online shopping is not the future, it’s the past. The greatest growth wave has already occurred. In fact, one factor may tarnish the advantage of e-commerce. Don’t count on tax-free shopping.

California may be setting a precedent in collection of online taxes. It got Amazon to remit sales taxes from California customers, though it’s a battle that has taken years to do. Other states would be inclined to do the same.

Tax regimes may be revised to account for this fact and shift from physical presence (the current definition) to point of sale/exchange. That would cut the tax savings from online stores, but leave the disadvantages (waiting for the shipment and shipping charges).

People can and do “meat” in many places. Parks, libraries, coffee shops, street festivals, museums, swap meets, farmers markets. That is why these places and events have grown so dramatically in popularity in recent years. People don’t shop online to avoid tax, they do it because they get more selection and do fuller comparisons and can save time and gas. I buy a higher and higher percentage of my purchases online; not to avoid tax but to compare more efficiently and to save gas and time. I can ‘visit’ 5 stores and compare their prices and selection in the time it would take to go to just one, without the expense of gas. They even carry it directly to the front door of my home! Wow!

Amazon is working on same day delivery. Also, the customer experience with online outlets like Amazon and Zappos is often far superior to a bricks and mortar store, as anyone who has tried to get useful information out of a hapless clerk at Best Buy or had to deal with the high pressure tactics of a commission driven sales clerk in a department store will tell you.

Eric McAfee here. Thanks for the conversation everybody. Even since I wrote this article about a month ago, I’ve noticed increasingly that smaller cities are gravitating away from their malls, even when they’re slow-growth places that aren’t experiencing a lot of residential decentralization. That’s because even the most stagnant regional economies are still witnessing retail decentralization in a major way. Houma was a perfect example, but also Pine Bluff, AR, an extremely depressed small city with a mostly dead mall but no other fresh new retail product to replace it. And just over the weekend I saw the tiny but struggling mall in tiny but seemingly healthy Effingham, IL–probably a future blog topic of mine. The corridor of big boxes (the “ducks in a row”) is winning out any many cities over their malls, regardless of the community’s economic health. Much to my surprise, the Muncie Mall appeared to be quite healthy–perhaps because it is poised as just one big-box among many out McGalliard Road. I haven’t visited Mounds Mall in Anderson, but I’m less sanguine from what I know about it. In Louisiana, another example is Hammond, an otherwise mostly prosperous college town that recently demolished its mall.

Following up on the discussion at hand here, I can’t help see how we’ve lamented the demise of certain big box or category killer institutions (Borders Books or Linens & Things comes to mind) as online shopping has rendered them obsolete, and yet the US Postal Service, which could have flourished as the backbone of e-commerce, is persistently insolvent. This irony reinforces Aaron’s comment about customer service experiences, which apparently the bricks-and-mortar post offices have failed to capitalize upon, while their competitors FedEx and UPS (which have a fraction of the physical storefront presence of the USPS) seem to have a far better track record–more in keeping with Amazon. There may come a time where bricks-and-mortar retailers can’t just cold-hire a 17-year-old to talk about iPads.

One thing that needs consideration is the retail space per capita phenomena.

The amount of active retail space per American is staggering, approx 40 sq ft per person. And it is still slowly increasing. Other developed rich countries have less than half this (discounting Canada). Is this sustainable? What will this inefficiency cost us in the long run? Doesn’t online reduce (but not eliminate) the need of brick and mortar?

I know that I personally buy more online and in less brick and mortar stores every year (Its a much better experience in my opinion). Look at the electronics sector to see the future of retail. Circuit city dead, Ultimate electronics dead, Comp USA dead, and Best buy is on life support.

For a homeowner on a project, nothing will replace Lowe’s, Home Depot, or Menards across about 80% of their product line. Those big boxes won’t go away. Even small contractors shop (and get advice) there.

Just think of the ridiculousness of ordering and shipping a custom-cut sheet of plywood, a couple 2×4’s, a half-dozen daylillies, a new faucet, a gallon of custom-mix paint, a replacement water hose for a washer. Not happening ever.

I’ve ordered an electric drill, nails, seeds, gorilla glue, an order of plywood to be delivered (admittedly I had to double check that by phone), AND a small bathroom faucet from lowes.com. Some of it arrived the next day.

Shanghai here. Regarding the future or lack thereof of online retail, check out China. People here (at least in the cities) can and do buy anything on Taobao – Chris Barnett’s list above would pose no problems at all (perhaps the custom-mix paint, but nothing surprises me any more). The Chinese online retail market is over $100 billion/year, still less than 5% of all retail, but it’s growing at a 50% annual rate. I don’t think anyone sees bricks and mortar going away, but I think it’s far too early to say that online shopping is over. Quite the opposite.

“The US got to one car per adult long before the Internet, and there are three generations here who learned to shop by driving around to physical stores. That will take decades to change.”

I think you underestimate the potential for consumers to adapt to new trends. Plus, the latest generation of consumers isn’t as wedded to their cars as past generations so assumptions along those lines are already being eroded away by their actual behavior.

Having been born and raised in Houma, I enjoyed your article. You really nailed the city’s retail culture on the head. The only issue I have concerns your comments about Town Hall. In Houma, Town Hall is not an administrative center for the municipal/parish government. The administrative offices of the Houma-Terrebonne Consolidated Government are housed in a downtown building called “Government Tower.” Rather, Town Hall is a privately-owned, for-rent event center. It’s just a big ballroom. For example, my high school’s homecoming was held at Town Hall. Prior to the opening of the Houma-Terrebonne Civic Center, a number of Mardi Gras balls were held at Town Hall. The owner(s) just decided to call it “Town Hall” with no official sanction (or protest) from the local government. Like event centers in other towns, it’s always vacant except when there is an event. Otherwise, you made many astute assessments.

Thanks again for all the comments, and I appreciate the correction on that last one, Boudreaux. I did seem strange to me that “Town Hall” would have so few visible security provisions for being a government building. And I do recall attending an event either in that building or close by several years ago, during the Louisiana Speaks community input sessions, which further led me to believe it was an annex building for city functions. Regardless of how its used, the sign for “Town Hall” is fantastic, in my opinion.

The distressed retail photos remind me of Glendale (west central Phoenix) AZ, where I lived from about 1997 until 2011. My wife bought a condo there in 1998, before we were married. Within a couple of years the 7-11’s on the corner s started turning into check cashing stores, Pawn shops popped up like mushrooms, and the clientelle at the Fry’s grocer took on a juggalo/people you saw on Cops patina. Metrocenter mall is just sad anymore.

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